The European ETF industry will certainly consider 2024 as a very good year since assets under management are rising from one record high to the next. The industry has already surpassed the previous annual all-time-high in terms of inflows in September and is aiming for a new record of estimated net inflows of more than €220.0 billion.Graph 1: European ETF Industry – Annual Estimated Net Sales, January 1, 2000 – September 30, 2024 (Euro Millions)
Source: LSEG LipperThe positive overall environment is also reflected in the activity of fund and ETF promoters. While many active managers have so far “only” expressed an interest in entering the European ETF market, an increasing number of actively managed fund promoters are entering the European ETF industry with their own ETF offerings. Although the growing product selection is generally positive for investors, it increases the need for more detailed research as these new ETFs are not standardized index products. Therefore, it can be concluded that the new products are increasing the market complexity and the depth of analysis required when selecting products.The regulatory environment for ETFs also improved once again in October 2024 as the Irish regulator, the Central Bank of Ireland (CBI), changed the regulation governing the naming of ETF share classes, making the launch of ETF share classes more attractive. It is therefore to be expected that the promoters of actively managed funds will make greater use of the option to launch an ETF share class of an existing fund rather than a new active ETF.At first glance, it looks like the European ETF industry is in good shape and might be ready to exceed short- and long-term growth expectations, as the market entrance of new promoters and the launch of new products are seen as growth drivers. That said, a more detailed view of the assets under management and fund flows reveals that they are both very concentrated. This means that only a few promoters and products are benefiting disproportionately from the trend toward ETFs, while a large portion of market participants and products are experiencing low, very low, or no inflows. Even worse, some providers are experiencing outflows in the record environment of 2024. As a result, some providers are finding it difficult to maintain their business model. One example of this is circa5000, which has withdrawn as a promoter from the European ETF market due to a lack of inflows. The lack of inflows in many products shows how difficult it is to survive in the highly competitive environment of the European ETF industry.The growth of the ETF industry should be seen as, in general, positive for investors since they are likely to benefit from a broader product range and competition among providers in the future. In addition, further product innovations, such as fixed-term bond ETFs, will help investors to implement their market views even more precisely in the future. Accordingly, I expect the growth in the European ETF industry to exceed the current expectations in the coming years.More By This Author:Russell 2000 Earnings Dashboard 24Q3 – Thursday, Oct. 31
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